Is it wise to borrow against the payout of a life insurance policy to pay for a bucket list wish for my mother, who is in declining health?
My mother is 78 years old and is in declining health. She has a bucket list item that would cost between $3,000 to $5,000 and has no way of coming up with the money. She has a whole life insurance policy with a death benefit of $100,000. Her beneficiaries would not suffer financial hardship if the payout were reduced. Would it be prudent to borrow against the payout so that she could fulfill her bucket list wish?
Based 100% on your statement that the beneficiary would not suffer financial hardship if they didn't get the full death benefit I would totally say use some of the money to check some items off her bucket list.
Just make sure you don't borrow so much that the policy will lapse. We don't want to create a financial hardship for your mother, or cause her any undue stress.
Best of Luck.
The decisive factor here is not impacting the beneficiaries of the policy. That should be the priority if you're considering reducing the face amount through a loan. If they would not be adversely affected, I say by all means, go for it. At that age and stage your mom should have a sense of completion and fulfillment.
While you're at it, take a quick inventory of available cash for other expenses your mom might have. What about out-of-pocket charges for medical treatment, things like that? Each one of my parents, as well as my elder aunt and uncle, paid for home aid assistance out of their pocket. If your mom is ailing, give some thought as to whether she will need care.
The cash value in a life insurance policy is a wonderful resource. Your mother can access the money with a phone call to the insurance company. Any withdrawals (and the interest that's charged) do not have to be repaid, and simply reduce the death benefit down the road.
I congratulate your mother on having the foresignt to purchase whole life insurance policy. It offers so many benefits!
Good luck, and hope your mother enjoys every item in her bucket list!